Editor's note (April 27, 2026)
Earlier versions of this article said standalone batteries qualified for a 30% federal credit through 2032. That was true under the Inflation Reduction Act. The One Big Beautiful Bill (Public Law 119-21, signed July 4, 2025) terminated the Section 25D Residential Clean Energy Credit for any system placed in service after December 31, 2025. If you bought a battery in 2025 you can still claim. After Jan 1, 2026 you cannot. We’ve rewritten the article to reflect the new reality.
TL;DR
- Section 25D is dead for residential battery + solar installs placed in service after Dec 31, 2025. No 30% credit, no step-down, no carryforward extension. IRS confirms.
- What survived: Section 48E commercial ITC (still 30% through 2032) for batteries owned by a third party and leased / PPA’d to you. Not great math — the leasing company keeps the credit.
- What survived: state-level rebates in CA, CT, NY, CO. Not in Texas. We have no state credit. We never did.
- What this means for Texas homeowners: payback on a $14K battery moved from ~10 years to ~14 years on the avoided-cost arbitrage alone. The math still works for some setups, doesn’t for others. Free-nights + miner stacking is now where the strongest payback lives.
- Use the battery payoff calculator — updated April 27, 2026, no longer assumes any federal credit.
What actually happened
In August 2022 the Inflation Reduction Act extended the Residential Clean Energy Credit (IRC Section 25D) and added “qualified battery storage technology” with a capacity of at least 3 kWh as an eligible expenditure. The credit was 30% through 2032, then stepping down.
In July 2025 the One Big Beautiful Bill Act (P.L. 119-21) reversed that. The new effective date for Section 25D termination is December 31, 2025. Anything “placed in service” after that date is no longer credit-eligible.
“Placed in service” in IRS-speak means the equipment is operationally ready and installed at the residence. For batteries, that’s typically the inspection sign-off date (when the local AHJ certifies the install passed). It is NOT the contract signing date or the equipment-purchase date.
Rick's Verdict
If you signed a battery contract in late 2025 and the installer didn’t finish + pass inspection before Dec 31, you’re probably out of luck on the federal side. Talk to your CPA — the rules around carryforward and partial-year installs are nuanced. I am not a tax pro.
What survived the bill
1. Section 48E commercial ITC (still 30% through 2032)
The commercial investment tax credit for standalone energy storage (Section 48E) is still alive for projects that qualify as commercial. For homeowners that means: if you lease your battery from a solar/storage company, or sign a PPA, the company that owns the equipment can claim the 30% credit and (theoretically) pass some of those savings through to you in lower lease payments.
My honest take: the lease/PPA companies keep most of the credit value. You see maybe 5-10% in your monthly lease cost vs. cash purchase. It’s rarely a winning move once you compare 20-year cumulative cost.
2. State-level rebates and incentives
Some states still subsidize residential storage:
| State | Program | Approx value |
|---|---|---|
| California | SGIP (Self-Generation Incentive Program) | $5K-$16K depending on equity tier |
| Connecticut | Energy Storage Solutions program | $200-$300/kWh upfront + performance-based |
| New York | NY-Sun Storage Block | $250/kWh declining-block |
| Colorado | Xcel Energy Battery Connect + state credits | ~$2K-$5K combined |
| Texas | Nothing. No state-level battery rebate. Some utility-specific programs (rare, small). | $0 |
If you’re in Texas, the federal credit is gone and the state never had one. Your incentive picture is materially worse than it was 6 months ago.
3. Sales tax exemptions
Texas has a 100% property tax exemption for residential solar and battery storage installations (Texas Tax Code Section 11.27). It doesn’t reduce purchase price; it prevents the battery from increasing your home’s assessed value for property tax purposes. Worth maybe $50-$200/year on a typical install. File the application with your county appraisal district.
4. Texas utility net-metering / buyback shifts (separate issue, also bad)
Texas REPs have been moving off retail-match net metering toward avoided-cost buyback for the last 2-3 years. This trend is independent of the federal credit news, and it’s still happening:
| Utility / TDU area | Retail rate (import) | Export rate (avoided cost) |
|---|---|---|
| Oncor (Dallas/Fort Worth) | ~16–20¢ | ~7–10¢ (best TX plans) |
| AEP Texas (S/Central) | ~17–21¢ | ~5–7¢ |
| TNMP (mixed) | ~17–22¢ | ~5–7¢ |
| CPS Energy (San Antonio) | ~13–15¢ | avoided cost (~3¢) |
| Austin Energy | tiered 11–22¢ | Value-of-Solar ~9¢ |
Rates verified April 2026 via REP filings + powertochoose.org. Always check the EFL on your specific plan.
The arbitrage value is still there: every kWh you can keep inside the house (battery for self-consumption) is worth 10-19¢ vs. the 3-7¢ you’d get exporting it. That math hasn’t changed.
The new payback math (no federal credit)
Same scenario as before, updated:
Scenario: 13.5 kWh battery, typical Texas home
- Battery cost (installed): $14,000
- Federal tax credit: $0 (was -$4,200 under the old rules)
- Net cost: $14,000
- Excess solar paid at ~5¢ avoided cost; battery lets you use that kWh at 18¢ retail — arbitrage 13¢/kWh
- Annual savings: 500 kWh/mo × 12 × 13¢ = $780/yr
- Plus backup value (1-2 outages/yr at ~$150 each): ~$200/yr
- Payback: $14,000 ÷ $980 ≈ 14 years.
For comparison, with the old federal credit it was ~10 years. The repeal added roughly 4 years to payback on cash-purchased residential batteries.
Where the math still works: households that can stack a Texas free-nights plan on top of arbitrage. The free-nights window means you charge the battery from the grid at $0/kWh and discharge during peak rates — arbitrage approaches 18-20¢/kWh, not 13¢. Payback drops to 8-10 years. Add a Bitcoin miner stack on the same free-nights plan (see my own setup) and the cash math swings positive even faster.
Where the math probably doesn’t work: household on a flat-rate retail plan, currently exporting little or no solar, no Bitcoin/EV/heavy off-peak loads to capture. For these folks, a battery in 2026 is mostly a backup-power purchase, not an investment. Buy if you value backup; don’t buy expecting payback.
Rick's Verdict
The 2026 incentive picture is genuinely worse than 2024. I won’t pretend otherwise. But the underlying arbitrage thesis is intact, especially for Texas free-nights customers. Run YOUR numbers on the payoff calculator — I rebuilt it April 27 to remove the credit assumption.
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Rick Laughhunn — Texas Master Electrician, NABCEP-certified solar installer. Privacy.
If you bought (or are buying) a battery in 2025
If your battery was placed in service on or before December 31, 2025, you can still claim the 30% credit on your 2025 taxes. Filing happens in early 2026 (by April 15 unless you extend).
What you’ll need from your installer:
- Itemized invoice: hardware + labor + permit + balance-of-system, with subtotals
- UL 9540 (or UL 1973) listing certificate for the battery
- Final inspection sign-off date from your AHJ — THIS is the “placed in service” date
- Any utility rebate paperwork (rebates reduce your basis before applying the 30%)
Take all four to your CPA. They fill out IRS Form 5695. The credit is non-refundable (it can zero out your tax liability but won’t pay you the excess) and it rolls forward. IRS Form 5695 instructions.
Three next actions
- Run your numbers on the battery payoff calculator. Updated April 27, 2026 — no longer assumes any federal credit.
- Read the net-zero mining article — the strongest residential-battery payback story in TX right now is free-nights + arbitrage stacking, not the IRS.
- Ask a question on the forum. If your situation is unique, I’ll tell you what I’d do at your house.
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Rick Laughhunn — Texas Master Electrician, NABCEP-certified solar installer. Privacy.
Rick Laughhunn
Licensed Master Electrician (Texas) · NABCEP-Certified PV Storage Installer · 20+ years in residential electrical + solar.
This article was originally published April 21, 2026 with assumptions consistent with the Inflation Reduction Act’s extended Section 25D credit. It was rewritten on April 27, 2026 to reflect Public Law 119-21 (One Big Beautiful Bill, July 2025) which terminated the residential credit. I’m a Master Electrician, not a tax professional. Always verify with your own CPA before making a purchase decision.